Rural Microentrepreneur Assistance Program, 51714-51731 [E9-24025]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Business-Cooperative Service

[Federal Register Volume 74, Number 193 (Wednesday, October 7, 2009)]
[Proposed Rules]
[Pages 51714-51731]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-24025]



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Part III





Department of Agriculture





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Rural Business--Cooperative Service



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7 CFR Part 4280



Rural Microentrepreneur Assistance Program; Proposed Rule

Federal Register / Vol. 74 , No. 193 / Wednesday, October 7, 2009 / 
Proposed Rules

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DEPARTMENT OF AGRICULTURE

Rural Business--Cooperative Service

7 CFR Part 4280

RIN 0570-AA71


Rural Microentrepreneur Assistance Program

AGENCY: Rural Business-Cooperative Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Food, Conservation, and Energy Act of 2008 (the Act), 
which amends Section 6022 of the Farm Security and Rural Investment Act 
of 2002, established the Rural Microentrepreneur Assistance Program. 
The program will provide technical and financial assistance in the form 
of loans and grants to qualified Microenterprise Development 
Organizations to support microentrepreneurs in the development and 
ongoing success of rural microenterprises. The Agency proposes to 
implement the program to meet the goals and requirements of the Act.

DATES: Comments on the proposed rule must be received on or before 
November 23, 2009 to be assured of consideration. The comment period 
for the information collection under the Paperwork Reduction Act of 
1995 continues through December 7, 2009.

ADDRESSES: You may submit comments to this proposed rule by any of the 
following methods:
     Federal eRulemaking Portal: Go to https://www.regulations.gov. Follow the instructions for submitting comments 
electronically.
     Mail: Submit your written comments via the U.S. Postal 
Service to the Branch Chief, Regulations and Paperwork Management 
Branch, U.S. Department of Agriculture, Stop 0742, 1400 Independence 
Avenue, SW., Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit your written comments via 
Federal Express mail, or other courier service requiring a street 
address, to the Branch Chief, Regulations and Paperwork Management 
Branch, U.S. Department of Agriculture, 300 7th Street, SW., 7th Floor, 
Washington, DC 20024.
    All written comments will be available for public inspection during 
regular work hours at the 300 7th Street, SW., 7th Floor address listed 
above.

FOR FURTHER INFORMATION CONTACT: Lori Washington, Loan Specialist, 
Business Programs, Specialty Programs Division, USDA, Rural 
Development, Rural Business--Cooperative Service, Room 6868, South 
Agriculture Building, Stop 3225, 1400 Independence Avenue, SW., 
Washington, DC 20250-3225, Telephone: (202) 720-9815, E-mail: 
lori.washington@wdc.usda.gov.

SUPPLEMENTARY INFORMATION: The information presented in this preamble 
is organized as follows:

I. Background
    A. Statutory Authority
    B. Nature of the Program
II. Discussion of Public Meeting and Request for Comments
III. Discussion of the Proposed Rule
    A. Purpose and Scope
    B. Definitions and Abbreviations
    C. Exception Authority
    D. Review or Appeal Rights
    E. Compliance With Other Federal Laws
    F. Program Requirements for Microenterprise Development 
Organizations
    G. Loan Provisions for Agency Loans to MDOs
    H. Grant Provisions
    I. MDO Application and Submission Information
    J. Application Scoring
    K. Selection of Applications for Funding
    L. Grant Administration
    M. Loan and Grant Servicing
    N. Loans From the MDOs to Microentrepreneurs and 
Microenterprises
    O. Ineligible Microloan Purposes
IV. Administrative Requirements
    A. Executive Order 12866
    B. Unfunded Mandates Reform Act
    C. Environmental Impact Statement
    D. Executive Order 12988, Civil Justice Reform
    E. Executive Order 13132, Federalism
    F. Regulatory Flexibility Act
    G. Executive Order 12372, Intergovernmental Review of Federal 
Program
    H. Executive Order 13175, Consultation and Coordination With 
Indian Tribal Governments
    I. Programs Affected
    J. Paperwork Reduction Act
    K. E-Government Act Compliance

I. Background

A. Statutory Authority

    Title VI, Section 6022 of the Food, Conservation, and Energy Act of 
2008 (Pub. L. 110-246 established the Rural Microentrepreneur 
Assistance Program (RMAP). The Act mandates that the Secretary of 
Agriculture establish a program to make loans and grants to 
microenterprise development organizations (MDOs) to support 
microentrepreneurs in the development and ongoing success of rural 
microenterprises. The Act further mandates that, under this program, 
MDOs will use funds borrowed from the Agency to make fixed interest 
rate microloans of not more than $50,000 to microentrepreneurs for 
startup and growing rural microenterprises.
    The Secretary shall also make annual grants to borrower MDOs to 
provide marketing management and other technical assistance (TA) to 
microentrepreneurs that have received or are seeking a microloan from 
an MDO under this program. Such grants will be in an amount equal to 
not more than 25 percent of the total outstanding balance of microloans 
made by the MDO, under this program, as of the date the grant is 
awarded or $100,000, whichever is less.
    The Secretary shall also make grants to MDOs to provide training or 
other operational enhancement activities or services for MDOs that 
serve rural microentrepreneurs. Maximum grant amounts for these 
enhancement grants will be announced annually and will be based on 
appropriations and consideration of program needs. In all cases, the 
maximum enhancement grant funding awarded to a single MDO will not 
exceed $25,000 or ten percent of the available funding, whichever is 
less, in any given year.
    In making loans to MDOs, the Act requires the Agency to make direct 
loans to MDOs to provide fixed rate microloans for startup and growing 
microenterprises. In making grants to MDOs, the Act requires the Agency 
to place an emphasis on MDOs serving microentrepreneurs located in 
rural areas that have suffered significant outmigration. The Agency 
shall also ensure, to the maximum extent practicable, that grant 
recipients include MDOs of varying sizes and that serve racially and 
ethnically diverse populations. MDOs will be eligible to receive TA 
grants to provide assistance to microentrepreneurs who have received, 
or are seeking, a microloan from the MDO under this program.
    The following section describes the proposed RMAP.

B. Nature of the Program

    This subpart contains the provisions and procedures by which the 
Agency will administer the Rural Microenterprise Assistance Program 
(RMAP). The purpose of the program is to support the development and 
ongoing success of rural microentrepreneurs and microenterprises 
(businesses generally with ten employees or fewer and in need of 
financing in the amount of $50,000 or less). To meet this purpose, the 
program will make financial assistance, business based training, and 
technical assistance available to startup and growing microenterprises 
in rural areas, including agricultural producers that meet the 
definition of a microenterprise. Loans and training will be delivered 
to microenterprises via a

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network of microenterprise development organizations (MDOs).
    An MDO is an organization that provides access to capital and 
business-based training services to very small (micro) businesses. A 
microentrepreneur is an owner and operator, or prospective owner and 
operator, of a rural business with not more than 10 full-time 
equivalent employees who is unable to obtain sufficient training, 
technical assistance, or credit. The definition of a Mircoenterprise 
Development Organization and a mircoentrepreneur is included in the 
rule at Sec.  4280.302.
    In addition to assisting microenterprises, MDOs may also receive 
grant funding to improve their own capabilities for providing services 
to their microborrowers.
    Microenterprises will not receive funds directly from the 
government. Rather, microlenders (i.e., MDOs that have been approved 
for participation in this program) will receive direct loans and 
grants. Direct loans will be used to capitalize rural revolving loan 
funds for the exclusive purposes of making microloans in rural areas, 
accepting payments from microborrowers, and repaying the Agency as 
required in their loan agreements. Grants will be used to fund 
business-based training and technical assistance, which will be 
provided to microenterprises by or in concert with the microlender that 
has provided one or more microloans to the microborrower seeking 
training.
    In following these guidelines, the Agency hopes to help build 
stronger rural communities by supporting rural microentrepreneurship, 
keeping and creating jobs, lessening outmigration, and working toward 
universal inclusion in the business sector.
    The Act provides mandatory funding for the program during years 
2009 through 2011 in the amount of $4 million dollars per fiscal year 
and also provides for $3 million of mandatory funding for FY 2012, plus 
such other funding as may be appropriated. During any of those years, 
additional funding may be appropriated. The number of loans and grants 
will vary from year to year, based on availability of funds and the 
quality of applications. The maximum annual loan and grant amounts a 
microlender may receive in any given year will also vary based on the 
availability of funds and will be announced annually in the Federal 
Register. The maximum loan amount to any one microlender will never 
exceed $500,000.
    Neither TA grant funds nor enhancements grant funds can be used by 
microlenders to repay their Agency loans.
    MDOs seeking to become microlenders under this program will submit 
application materials to USDA Rural Development through their local or 
state Rural Development Business Programs office. Microenterprises 
seeking financial or technical assistance under this program will 
submit application materials directly to their local microlender.
    A list of local microlenders will be made available at the State 
Rural Development, Business Programs office and will be made available 
on the USDA Rural Development Web site.

II. Discussion on Public Meeting and Request for Comments

    Prior to the development of this proposed rule, USDA published in 
the Federal Register a notice of public meeting [January 21, 2009, 74 
FR 3550] inviting interested parties to attend and present their ideas 
and opinions regarding the proposed program. The meeting was held on 
January 26, 2009 in Washington, DC. Eight speakers presented comments 
on the authorizing provisions of the Act regarding program development 
and operation. USDA considered that input when developing this proposed 
rule. The comments received during the meeting will be included with 
those received during the public comment period for proposed rule. All 
comments and USDA's responses to those comments will be summarized and 
considered during the development of the final rule.
    As a part of today's proposed rulemaking, the Agency is requesting 
comments on the program being proposed. The Agency is specifically 
seeking input in the following areas:
    1. The scoring section as it applies to administrative funds.
    2. The provisions for a maximum loan amount to any one single 
microlender and a maximum cap of $2.5 million over time as provided in 
Sec.  4280.311(e)(1).
    The Agency will balance comments, where possible, with the need to 
establish requirements that meet the goals and rules of the program.
    Applicants and the Agency must meet all applicable laws, 
regulations and executive orders. Applicants must provide the Agency 
with appropriate information so that all compliance issues can be 
evaluated in a fair and objective process.
    Submit comments to the Agency as indicated in the DATES and 
ADDRESSES sections above. The Agency will consider all comments during 
development of the final rule.

III. Discussion of the Proposed Rule

    The following paragraphs present a discussion of the provisions of 
each section of the proposed rule in the order that they appear.

A. Purpose and Scope (Sec.  4280.301)

    This section describes the purpose, scope and applicability of the 
program and applies to all potential MDO applicants. An MDO selected to 
receive a direct loan will be automatically eligible to receive a TA 
grant. As such, RMAP applications will include all information 
necessary to make a loan and grant determination. Grant dollars will be 
disbursed as microloans are distributed. The amount of a TA grant may 
be equal to no more than 25 percent of the total outstanding balance of 
microloans made by an MDO under this program or $100,000, whichever is 
less.

B. Definitions and Abbreviations (Sec.  4280.302)

    This section presents program specific definitions. Some of these 
definitions are included in the statute. Others are proposed for use by 
the Agency to more clearly implement the program.
    Statutorily defined terms. The Act defines several terms that are 
used in this document. Because the terms are defined by statute, the 
Agency cannot change the definitions. These terms are:
     Indian tribe,
     Microenterprise development organization,
     Microentrepreneur,
     Microloan,
     Program, and
     Rural microenterprise.
    For the purposes of this rule, rural microentrepreneur and 
microentrepreneur are synonymous.
    Proposed non-statutory terms herein include:
     Administrative expenses,
     Agency personnel,
     Award,
     Business incubator,
     Default,
     Delinquency,
     Enhancement grant,
     Facilitation of capital,
     Indian tribal government employee,
     Loan loss reserve fund,
     Microlender,
     Military personnel,
     Rural microloan revolving fund,
     Rural or rural area,
     Significant outmigration,
     Technical assistance and training, and
     Technical assistance grant.
    With regard to the definition of Agency personnel, the Agency is

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proposing the following definition: ``Individuals employed by the 
United States Department of Agriculture-Rural Development Agency, who 
are more than 6 months from separating from the Agency.'' While the 
Agency does not want to allow the program to provide assistance to 
Agency personnel, the Agency at the same time wants to ensure that that 
a person retiring or leaving the Agency and wishing to pursue self 
employment can obtain the services he or she needs to be ready for self 
employment at the time of separation. Therefore, the Agency is 
proposing that the definition of Agency personnel ends at 6 months 
prior to the expected date of separation in order to allow for pre-
separation preparation and to allow these individuals to be considered 
as non-agency personnel. The Agency is also proposing a similar 
condition for the definition of military personnel.

C. Exception Authority (Sec.  4280.303)

    This section explains the Administrator's limited authority to make 
exceptions to regulatory requirements, or provisions. It specifically 
excludes permissions to make exceptions for applicant or project 
eligibility, the rural area definition, to accept applicants that would 
not score at an acceptable level, and to accept applicants that have 
not successfully completed. Further, it requires that any exceptions be 
in the best financial interest of the Federal government and that 
exceptions not be in conflict with any applicable laws.

D. Review or Appeal Rights and Administrative Concerns (Sec.  4280.304)

    This section provides the legal basis by which an unsuccessful 
applicant may request an Agency review or file an appeal with the USDA 
National Appeals Division, in accordance with 7 CFR part 11. This 
section also provides contact information for microborrowers that have 
any concerns over the implementation of this program.

E. Compliance With Other Federal Laws (Sec.  4280.305)

    Applicants and the Agency must meet all applicable laws, 
regulations and executive orders including, but not limited to, the 
Equal Employment Opportunities Act of 1972, the Americans with 
Disabilities Act, the Equal Credit Opportunity Act, and the Civil 
Rights Act of 1964. Applicants must provide the Agency with appropriate 
information so that all compliance issues can be evaluated in a fair 
and objective process.
    This section also presents USDA's policy of prohibiting 
discrimination in all its programs and activities.

F. Program Requirements for Microenterprise Development Organizations 
(Sec.  4280.310)

    This section explains the basic criteria for applicant eligibility 
that apply to all applicants. Requirements specific to direct loan 
applicants (potential microlenders), grants to enhance the capabilities 
of the microlender (referred to as enhancement grants) and grants to 
assist microentrepreneurs (TA grants to microlenders) are also 
explained. This section also describes eligibility issues, and 
application qualification issues.

G. Loan Provisions for Agency Loans to MDOs (Sec.  4280.311)

    This section explains, in detail, provisions specific to the direct 
loan program, including loan purposes; eligible and ineligible 
activities; the requirement for making microloans and loan terms and 
conditions for MDO borrowers. Loan funds must be used to capitalize 
rural microloan revolving funds. The account containing the funds may 
only be used to make microloans to rural microentrepreneurs and rural 
microenterprises; to accept repayments from those borrowers, and to 
repay the Agency. The Agency will require MDOs to report regularly on 
the status of their microloan portfolios using aging reports and 
narrative information. Sanctions may be imposed on non-performing 
lenders deemed to be in either performance or financial default under 
the program to include loan funds being called immediately due and 
payable and grant funds being held. Interest rates may be raised on 
funding that has not been disbursed to microborrowers. Restrictions 
regarding limitations on microloans are discussed in Sec.  4280.322.
    Loan funding limitations are defined in this section. The minimum 
loan amount from the Agency to any microlender will be $50,000. The 
maximum loan amount to any microlender will be announced annually based 
on the availability of funds, but will never exceed $500,000. The 
Agency believes that setting minimum and maximum loan amounts will best 
serve rural communities and allow for greater program participation. 
Loans made to microlenders must be fully supported by the ability to 
relend the money in accordance with Sec.  4280.311 and with the ability 
to repay the loan over an 18-year amortization. Because the minimum 
loan to a microlender is equal to the maximum loan amount for a 
microloan, and to ensure that rural microloan revolving funds are not 
exposed to danger of collapse based on a single microloan, no microloan 
will be made for an amount that is equal to more than $50,000 or 20 
percent of the amount loaned to the microlender under a single 
capitalization, whichever is less.
    This section also discusses protection against losses, presenting 
loan loss reserve fund (LLRF) requirements and Agency oversight. The 
Agency is requiring quarterly reporting and provision of evidence that 
the sum of the unexpended amount in the RMRF, plus the amount in the 
LLRF, plus debt owed by the microborrowers is equal to or greater than 
105 percent of the amount owed by the MDO to the Agency. The Agency 
will hold first lien position on the RMRF account, the LLRF, and all 
notes receivable from microloans.

H. Grant Provisions (Sec.  4280.312)

    This section presents the requirements for technical assistance and 
microlender enhancement grants. General provisions include cost share 
and matching requirements. The Federal share of the cost of any project 
under this program will not exceed 75 percent. Oversight includes 
quarterly reporting. To help ensure that MDOs can cover the cost of 
administering this program, and to ensure that Agency grant funds are 
used to support rural microenterprise development, the Agency allows 
each MDO to utilize up to 10 percent of any TA grant received to be 
used to pay administrative expenses, consistent with the statute. 
However, the Agency is reserving the right to deny the 10 percent and 
to fund administrative expenses at a lower percentage. No part of an 
enhancement grant will be used for administrative expenses. The purpose 
of these grants is to assist the microlender with obtaining training to 
improve internal organizational efficiency, lending and training 
capacity, and skills to better serve microentreprenuers and 
microenterprises. Because the enhancement grants do not directly assist 
these clients, no lending or training administrative costs are 
associated with the grant.
    Ineligible grant purposes include application costs, project costs 
incurred prior to application date, and those purposes prohibited by 
law.
    In this section, we also describe the purposes, selection criteria 
and award amounts for grants, which must be used to support rural 
microenterprise development through the provision of training or other 
operational improvement services to MDOs. Microlender enhancement 
grants are to

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be used to allow MDOs to seek out training and other enhancement 
services to strengthen their own organizations.
    To the extent practicable, the Agency will place an emphasis on 
providing financial assistance to MDOs of various sizes, that serve 
microentrepreneurs in rural areas suffering significant outmigration; 
and that serve racially and ethnically diverse populations.
    Maximum amounts for enhancement grants will be determined and 
announced annually by the Agency based on program needs and the 
availability of funds. In all cases, the maximum enhancement grant 
funding awarded to a single MDO will not exceed $25,000 or ten percent 
of the available funding, whichever is less, in any given year.
    The statute requires the Agency to make technical assistance (TA) 
grants to MDOs to provide marketing, management and other technical 
assistance to microentrepreneurs that have received a loan from the MDO 
under this program. Applicant MDOs seeking a direct loan under this 
program must submit Standard Forms 424, ``Application for Federal 
Assistance''; 424A, ``Budget Information--Non-construction Programs''; 
and 424B, ``Assurances--Non-construction Programs'' as a part of the 
application. An organization selected to become a microlender will be 
eligible to receive a TA grant in an amount less than or equal to 25 
percent of the total outstanding balance of program funded microloans 
made by that organization or $100,000, whichever is less.
    This section also discusses grant administration issues such as 
determination of grant amount and grant disbursement.

I. MDO Application and Submission Information (Sec.  4280.315)

    This section explains those loan application requirements that will 
be regulatory. Submission details such as dates, times, and locations 
will be announced annually in the Federal Register. Forms that are 
required to be submitted with each application are listed in this 
section of the proposed rule. Form submissions may vary based on the 
type of assistance being sought.

J. Application Scoring (Sec.  4280.316)

    This section discusses documentation that applicants must provide 
to meet eligibility requirements for loans and grants. Applicants must 
clearly indicate the category of funding for which they are applying. 
These categories are microlenders with 3 or more years experience, 
microlenders with less than 3 year experience, and MDOs seeking 
enhancement grant funding. Scoring requirements vary for each category.
    This section also provides details regarding the scoring criteria, 
which is divided into four subsections. Subsection (a) applies to all 
applicants. Subsections (b) and (c) apply to MDOs seeking to be 
microlenders depending on the number of years of their experience. 
Subsection (b) describes the additional information that will be scored 
for MDOs with three or more years experience, while subsection (c) 
describes the additional information that will be scored for MDOs with 
less than three years experience.
    Because a successful microlending program integrates training and 
technical assistance prior to, during, and after the loan making 
process, MDOs selected to participate as microlenders must include in 
their applications, along with other required documentation, a 
description of their technical assistance and training program. This 
information, along with the applicable Standard Form 424, will be 
considered the grant application so that a separate application package 
will not be required for the TA grant. While the maximum TA grant 
amount is 25 percent of the loan amount or $100,000, whichever is less, 
grant amounts may be adjusted downward based on information provided in 
the application.
    Subsection (d) describes the additional criteria by which any MDO 
seeking funding for enhancement grants will be scored. Additionally, 
the dollar amount of TA grants will be based on the loan amount made to 
the MDO, in accordance with the statute, and the program microloan 
portfolio owed to the MDO.
    Lastly, subsection (e) describes optional application provisions 
for microlenders who have participated in this program for at least 
five years. The optional application provisions reduce the amount of 
paperwork required to apply for future funding under this program.

K. Selection of Applications for Funding (Sec.  4280.317)

    This section further explains the selection process by which funds 
will be awarded. Applications from microlenders with 3 or more years 
experience and applications from microlenders with less than 3 years 
experience will be ranked together. Enhancement grant applications will 
be ranked separately from the microlender applications. Subject to the 
availability of funds, the highest scoring applications will be funded 
in descending order.
    Given the current funding level, during the initial year of 
operations, applications will be submitted to the State Offices for 
initial review, intergovernmental review, and comments. The 
applications will be submitted by the Rural Development State Offices 
to the Rural Development National Office for final scoring and 
selection. Applications will be accepted in the National Office on a 
quarterly basis using Federal Fiscal Quarters. The Agency reserves the 
right, as funding for the program increases, to update this method of 
program administration in future years, including managing the program 
through Rural Development's state offices.

L. Grant Administration (Sec.  4280.320)

    Discusses the quarterly reporting, site visits, and inspection of 
records that the Agency will utilize to provide oversight of any 
organization receiving a grant under this program. Also explains that 
the Agency will make grant payments not more often than on a quarterly 
basis.

M. Loan and Grant Servicing (Sec.  4280.321)

    Presents a listing of other regulations that will be applicable for 
servicing loans and grants made to MDOs.

N. Loans From the MDOs to the Microentrepreneurs and Microenterprises 
(Sec.  4280.322)

    Discusses requirements for microloans from the MDO to the 
microborrowers. Presents information on the maximum microloan amounts, 
terms and conditions, insurance requirements, the appeal of MDO lending 
decisions, and eligible microloan purposes.

O. Ineligible Microloan Purposes (Sec.  4280.323)

    Describes those activities for which Agency microloan funds may not 
be used.

IV. Administrative Requirements

A. Executive Order 12866

    This proposed rule has been reviewed under Executive Order (EO) 
12866 and has been determined significant by the Office of Management 
and Budget. The EO defines a ``significant regulatory action'' as one 
that is likely to result in a rule that may: (1) Have an annual effect 
on the economy of $100 million or more or adversely affect, in a 
material way, the economy, a sector of the economy, productivity, 
competition, jobs, the environment, public health or safety, or State, 
local, or tribal governments or communities; (2) create a serious 
inconsistency or otherwise

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interfere with an action taken or planned by another agency; (3) 
materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
this EO.
    The Agency conducted a cost-benefit analysis to fulfill the 
requirements of Executive Order 12866. The Agency has identified 
potential benefits to prospective program participants and the Agency 
that are associated with improving the availability of microlevel 
business capital, business-based training and technical assistance, and 
enhancing the ability of microlenders to service the microentrepreneurs 
to whom they are making their microloans.

B. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, 
Rural Development must prepare, to the extent practicable, a written 
statement, including a cost-benefit analysis, for proposed and final 
rules with ``Federal mandates'' that may result in expenditures to 
State, local, or tribal governments, in the aggregate, or to the 
private sector, of $100 million or more in any one year. With certain 
exceptions, section 205 of UMRA requires Rural Development to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, most cost-effective, or least burdensome alternative 
that achieves the objectives of the rule.
    This proposed rule contains no Federal mandates (under the 
regulatory provisions of Title II of the UMRA) for State, local, and 
tribal governments or the private sector. Thus, this rule is not 
subject to the requirements of sections 202 and 205 of the UMRA.

C. Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' Rural Development has determined 
that this action does not constitute a major Federal action 
significantly affecting the quality of the human environment and, in 
accordance with the National Environmental Policy Act (NEPA) of 1969, 
42 U.S.C. 4321 et seq., an Environmental Impact Statement is not 
required.

D. Executive Order 12988, Civil Justice Reform

    This rule has been reviewed in accordance with Executive Order 
12988, Civil Justice Reform. Except where specified, all State and 
local laws and regulations that are in direct conflict with this rule 
will be preempted. Federal funds carry Federal requirements. No person 
is required to apply for funding under this program, but if they do 
apply and are selected for funding, they must comply with the 
requirements applicable to the Federal program funds. This rule is not 
retroactive. It will not affect agreements entered into prior to the 
effective date of the rule. Before any judicial action may be brought 
regarding the provisions of this rule, the administrative appeal 
provisions of 7 CFR parts 11 and 780 must be exhausted.

E. Executive Order 13132, Federalism

    It has been determined, under Executive Order 13132, Federalism, 
that this proposed rule does not have sufficient Federalism 
implications to warrant the preparation of a Federalism Assessment. The 
provisions contained in the proposed rule will not have a substantial 
direct effect on States or their political subdivisions or on the 
distribution of power and responsibilities among the various government 
levels.

F. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601-602) generally 
requires an agency to prepare a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedure Act or any other statute. If an agency 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities, this analysis is not required. 
Small entities include small businesses, small organizations, and small 
governmental jurisdictions.
    In compliance with the RFA, Rural Development has determined that 
this action will not have a significant economic impact on a 
substantial number of small entities for the reasons discussed below. 
While, the majority of MDOs expected to participate in this Program 
will be small businesses, the average cost to an MDO is estimated to be 
approximately 1 percent of the total mandatory funding available to the 
program in fiscal years 2009 through 2012. Rural Development estimates 
that most of the administrative costs incurred by MDOs participating in 
the program will be covered by the interest rate spread between the one 
percent loan from Rural Development and the interest rate on loans made 
to the microentrepreneur by the MDO. Further, this regulation only 
affects MDOs that choose to participate in the program.

G. Executive Order 12372, Intergovernmental Review of Federal Programs

    This program is subject to Executive Order 12372, which requires 
intergovernmental consultation with State and local officials. 
Intergovernmental consultation will occur for the assistance to MDOs in 
accordance with the process and procedures outlined in 7 CFR part 3015, 
subpart V. Assistance to rural microenterprises will not require 
intergovernmental review.
    Rural Development will conduct intergovernmental consultation using 
RD Instruction 1940-J, ``Intergovernmental Review of Rural Development 
Programs and Activities,'' available in any Rural Development office, 
on the Internet at https://www.rurdev.usda.gov/regs, and in 7 CFR part 
3015, subpart V. Note that not all States have chosen to participate in 
the intergovernmental review process. A list of participating States is 
available at the following Web site: https://www.whitehouse.gov/omb/grants/spoc.html.

H. Executive Order 13175, Consultation and Coordination With Indian 
Tribal Governments

    This executive order imposes requirements on Rural Development in 
the development of regulatory policies that have tribal implications or 
preempt tribal laws. Rural Development has determined that the proposed 
rule does not have a substantial direct effect on one or more Indian 
tribe(s) or on either the relationship or the distribution of powers 
and responsibilities between the Federal Government and the Indian 
tribes. Thus, the proposed rule is not subject to the requirements of 
Executive Order 13175.

I. Programs Affected

    Catalog of Federal Domestic Assistance (CFDA) Number. This program 
is listed in the Catalog of Federal Domestic Assistance under Number 
10.870.

J. Paperwork Reduction Act

    The collection of information requirements contained in this 
proposed rule have been submitted to the Office of Management and 
Budget (OMB) for clearance. In accordance with the

[[Page 51719]]

Paperwork Reduction Act of 1995, USDA Rural Development will seek 
standard OMB approval of the reporting requirements contained in this 
proposed rule and hereby opens a 60-day public comment period.
    Title: Rural Microentrepreneur Assistance Program.
    Type of Request: New Collection.
    Abstract: The collection of information is vital to Rural 
Development to make decisions regarding the eligibility of projects and 
loan and grant recipients in order to ensure compliance with the 
regulations and to ensure that the funds obtained from the Government 
are being used for the purposes for which they were awarded. 
Microdevelopment organizations seeking funding under this program will 
have to submit applications that include specified information, 
certifications, and agreements. This information will be used to 
determine applicant eligibility and to ensure that funds are used for 
authorized purposes. Applications for continued participation in the 
program will include primarily any needed updates to the information 
submitted with the initial application.
    Once an MDO has been approved for participation in the program, it 
must submit additional documents, reports, and certifications to the 
Agency. For MDOs receiving loans, the necessary documents are required 
around loan closing. For MDOs receiving grant funds, the MDO must 
submit a financial status report and request for advancement or 
reimbursement. In addition, all MDOs that are awarded funds under this 
program must submit quarterly reports to the Agency to provide 
information on their performance. Some grantees will also be required 
to submit other reports on occasion in the event of poor performance or 
other such occurrences that require more than the usual set of 
reporting information. Lastly, grantees that plan to spend technical 
assistance grant funds on administrative expenses must submit an annual 
budget of proposed administrative expenses for Agency approval.
    In summary, this collection of information is necessary in order to 
implement this program.
    The following estimates are based on the anticipated average over 
the first three years the program is in place.
    Estimate of Burden: Public reporting for this collection of 
information is estimated to average 2 hours per response.
    Respondents: Microenterprise development organizations (nonprofit 
entities, Indian tribes, and public institutions of higher education).
    Estimated Number of Respondents: 66.
    Estimated Number of Responses per Respondent: 36.
    Estimated Number of Responses: 2,379.
    Estimated Total Annual Burden (Hours) on Respondents: 4,462.
    Copies of this information collection can be obtained from Cheryl 
Thompson, Regulations and Paperwork Management Branch at (202) 692-
0043.
Comments
    Comments are invited regarding: (a) Whether the proposed collection 
of information is necessary for the proper performance of the functions 
of Rural Development, including whether the information will have 
practical utility; (b) the accuracy of Rural Development's estimate of 
the burden of the proposed collection of information including the 
validity of the methodology and assumptions used; (c) ways to enhance 
the quality, utility and clarity of the information to be collected; 
and (d) ways to minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology. Comments may be 
sent to Cheryl Thompson, Regulations and Paperwork Management Branch, 
Support Services Division, U.S. Department of Agriculture, Rural 
Development, Stop 0742, 1400 Independence Ave., SW., Washington, DC 
20250-0742. All responses to this proposed rule will be summarized and 
included in the request for OMB approval. All comments will also become 
a matter of public record.

K. E-Government Act Compliance

    USDA is committed to complying with the E-Government Act of 2002 
(Pub. L. 107-347, December 17, 2002), to promote the use of the 
Internet and other information technologies to provide increased 
opportunities for citizen access to government information and 
services, and for other purposes.

List of Subjects in 7 CFR 4280

    Business programs, Grant programs, Loan programs, Microenterprise 
development organization, Microentrepreneur, Rural development, Small 
business, Rural areas.

    For the reasons set forth in the preamble, part 4280 of title 7 of 
the Code of Federal Regulations is proposed to be amended as follows:

PART 4280--LOANS AND GRANTS

    1. The authority citation for part 4280 is revised to read as 
follows:

    Authority:  7 U.S.C. 1989(a), 7 U.S.C. 2009s.

    2. Part 4280 is amended by adding a new subpart D to read as 
follows:
Subpart D--Rural Microentrepreneur Assistance Program
Sec.
4280.301 Purpose and scope.
4280.302 Definitions and abbreviations.
4280.303 Exception authority.
4280.304 Review or appeal rights and administrative concerns.
4280.305 Nondiscrimnation and compliance with other Federal laws.
4280.306-4280.309 [Reserved]
4280.310 Program requirements for MDOs.
4280.311 Loan provisions for Agency loans to microlenders.
4280.312 Grant provisions.
4280.313-4280.314 [Reserved]
4280.315 MDO application and submission information.
4280.316 Application scoring.
4280.317 Selection of applications for funding.
4280.318-4280.319 [Reserved]
4280.320 Grant administration.
4280.321 Loan and grant servicing.
4280.322 Loans from the microlenders to the microentrepreneurs and 
microenterprises.
4280.323 Ineligible microloan purposes.
4280.324-4280.400 [Reserved]

Subpart D--Rural Microentrepreneur Assistance Program


Sec.  4280.301  Purpose and scope.

    (a) This subpart contains the provisions and procedures by which 
the Agency will administer the Rural Microenterprise Assistance Program 
(RMAP). The purpose of the program is to support the development and 
ongoing success of rural microentrepreneurs and microenterprises 
(businesses generally with ten employees or fewer and in need of 
financing in the amount of $50,000 or less). To meet this purpose, the 
program will make financial assistance, business based training, and 
technical assistance available to microenterprises in rural areas and 
will deliver direct loans and technical assistance (TA) grants to 
Microenterprise Development Organizations (MDOs). These funds will be 
used by MDOs to assist microentrepreneurs by provision of integrated 
financial assistance, business training, and technical support. The 
program will also provide enhancement grants to enhance the 
capabilities of MDOs to support rural microenterprise development. In 
addition, program funds will be used to support other such activities 
as deemed appropriate by the

[[Page 51720]]

Secretary to ensure the development and ongoing success of rural 
microenterprises.
    (b) The Agency will make direct loans to microlenders, as defined 
in Sec.  4280.302, to capitalize microloan revolving funds to provide 
fixed interest rate microloans to microentrepreneurs for startup and 
growing microenterprises. Technical assistance grants will be awarded 
to microlenders to provide technical assistance to microentrepreneurs 
who have received one or more microloans from the MDO under this 
program.
    (c) To ensure that MDOs are able to provide appropriate training to 
microentrepreneurs, operate efficiently, and stay up-to-date on 
business training practices, the Agency will make enhancement grants to 
microlenders that have successfully completed the application scoring 
process for such grants, whether or not they receive other funding 
under this program, to enhance their ability to provide training, 
operational support, business planning, market development assistance, 
and other related services to rural microentrepreneurs.


Sec.  4280.302  Definitions and abbreviations.

    (a) General definitions. The following definitions apply to the 
terms used in this subpart.
    Administrative expenses. Those expenses incurred by an MDO for the 
operation of services under this program. Not more than 10 percent of 
TA grant funding may be used for such expenses.
    Agency. USDA Rural Development, Rural Business-Cooperative Service 
or its successor organization.
    Agency personnel. Individuals employed by the United States 
Department of Agriculture-Rural Development Agency, who are more than 6 
months from separating from the Agency.
    Applicant. The eligible legal entity, also referred to as a 
microenterprise development organization or MDO, submitting the 
application.
    Application. The forms and documentation submitted by an MDO for 
acceptance into the program.
    Award. The written documentation, executed by the Agency after the 
application is approved, containing the terms and conditions for 
provision of financial assistance to the applicant. Financial 
assistance may constitute a loan or a grant or both.
    Business incubator. An organization that provides temporary 
premises, and also provides technical assistance, advice, use of 
equipment, and may provide access to capital, or other facilities or 
services to microentrepreneurs and microenterprises starting or growing 
a business.
    Default. Default may be monetary or performance based.
    (i) Monetary default is failure by a participating MDO to meet any 
financial obligation or term of a loan or grant. An MDO will be 
considered in monetary default if it fails to make 3 or more scheduled 
loan payments in a row; if it misuses grant funding; or if it has less 
than a total of 105 percent of the dollars lent to it under this 
program and still owed to the Agency in a combination of the Rural 
Microloan Revolving Fund (RMRF), the Loan Loss Reserve Fund (LLRF), and 
the total outstanding balance of microloans made.
    (ii) Performance default is failure by a participating MDO to meet 
any regulatory requirement or any requirement in program guidance.
    Delinquency. Failure by an MDO to make a scheduled loan payment by 
the due date or within any grace period as stipulated in the promissory 
note and loan agreement.
    Enhancement grant. A grant whose funds are used to improve the 
internal operations of a microlender participating under this program 
in a manner that allows the microlender to improve their capabilities 
in delivering training, operational support, business planning, market 
development assistance, and other related services to rural 
microentrepreneurs
    Facilitation of capital. For purposes of this program, facilitation 
of capital means assisting a technical assistance client in obtaining a 
microloan whether or not the microloan is wholly or partially 
capitalized by funds provided under this program.
    Fiscal year (FY). Fiscal year means the 12-month period beginning 
October 1 of any given year and ending on September 30 of the following 
year.
    Full-time equivalent employee (FTE). The Agency uses the Bureau of 
Labor Statistics definition of full-time jobs as its standard 
definition. For purposes of this program, a full-time job is a job that 
has at least 35 hours in a work week. As such, one full-time job with 
at least 35 hours in a work week equals one FTE; two part-time jobs 
with combined hours of at least 35 hours in a work week equals one FTE, 
and three seasonal jobs equals one FTE. If an FTE calculation results 
in a fraction, it should be rounded up to the next whole number.
    Indian tribal government employee. An individual currently employed 
by its Indian tribal government with more than 6 months remaining in 
his/her contract or other agreement to remain a paid, full-time 
employee of the tribal government. If no written agreement exists, then 
there must be an understanding with the tribe that the employee is 
expected to remain employed on a full-time basis with the tribe for 6 
months or more.
    Indian tribe. The term ``Indian tribe'' as defined in the Indian 
Self-Determination and Education Assistance Act (25 U.S.C. 450b)--means 
``any Indian tribe, band, nation, or other organized group or 
community, including any Alaska Native village or regional or village 
corporation as defined in or established pursuant to the Alaska Native 
Claims Settlement Act (85 Stat. 688) [43 U.S.C. 1601 et seq.], which is 
recognized as eligible for the special programs and services provided 
by the United States to Indians because of their status as Indians.''
    Loan loss reserve fund (LLRF). An interest-bearing deposit account 
an MDO must establish to pay any shortage in the rural microloan 
revolving fund caused by delinquencies or losses on microloans. The 
LLRF account must be maintained in an amount equal to at least 5 
percent of the outstanding balance of funds owed to the Agency by the 
MDO under this program. The Agency will hold a security interest in the 
account and all funds therein, until the MDO has repaid its debt to the 
Agency under this program.
    Microenterprise development organization (MDO). An organization 
that:
    (i) Is a non-profit entity; an Indian tribe (the government of 
which tribe certifies that no MDO serves the tribe and no RMAP exists 
under the jurisdiction of the Indian tribe); or a public institution of 
higher education; and
    (ii) Provides training and technical assistance to rural 
microentrepreneurs; and
    (iii) Facilitates access to capital or another related service; and
    (iv) Has a demonstrated record of delivering services to rural 
microentrepreneurs, or an effective plan to develop a program to 
deliver such services.
    Microentrepreneur. An owner and operator, or prospective owner and 
operator, of a rural microenterprise who is unable to obtain sufficient 
training, technical assistance, or credit other than under this 
section, as determined by the Secretary. For purposes of this 
regulation, rural microentrepreneur and microentrepreneur are 
synonymous. All microentrepreneurs assisted under this regulation must 
be located in rural areas. Microenterprises include businesses 
employing 10 people or

[[Page 51721]]

fewer that are in need of $50,000 or less in business financing and/or 
in need of business based technical assistance and training. Such 
businesses may include any type of legal business that meets local 
standards of decency. Business types may also include agricultural 
producers provided they meet the stipulations in this definition.
    Microlender. An MDO that has been approved by the Agency for 
participation under this subpart.
    Microloan. A business loan of not more than $50,000 with a fixed 
interest rate that is provided to a rural microentrepreneur for startup 
and growing rural microenterprises.
    Military personnel. Individuals, regardless of rank, currently 
enlisted in active military service with more than 6 months remaining 
in their service requirement.
    Nonprofit entity. An entity, determined by State Law, to be 
conducting business so as to be defined as a nonprofit entity and that 
has applied for or received such designation from the U.S. Internal 
Revenue Service.
    Program. The Rural Microentrepreneur Assistance Program (RMAP).
    Rural microenterprise. The term `rural microenterprise' means:
    (i) A sole proprietorship located in a rural area; or
    (ii) A business entity with not more than 10 full-time-equivalent 
employees located in a rural area.
    Rural microloan revolving fund (RMRF). An interest-bearing account 
into which an MDO shall deposit loan funds received from the Agency, 
from which loans shall be made by the MDO to microentrepreneurs, and 
from which repayments to the Agency shall be made. The Agency will hold 
a security interest in the RMRF account and on any funds therein until 
such time as the MDO repays its debt to the Agency under this program.
    Rural or rural area. For the purposes of this program, the terms 
`rural' and `rural area' are defined as any area of a State not in a 
city or town that has a population of more than 50,000 inhabitants, 
according to the latest decennial census of the United States; and the 
contiguous and adjacent urbanized area.
    (i) For purposes of this definition, cities and towns are 
incorporated population centers with definite boundaries, local self-
government, and legal powers set forth in a charter granted by the 
State.
    (ii) Notwithstanding any other provision of this paragraph, within 
the areas of the County of Honolulu, Hawaii, and the Commonwealth of 
Puerto Rico, the Secretary may designate any part of the areas as a 
rural area if the Secretary determines that the part is not urban in 
character, other than any area included in the Honolulu census 
designated place (CDP) or the San Juan CDP.
    Significant outmigration. The movement of population, other than 
migrant worker populations, away from a defined area at a rate of 15 
percent or higher based on the three most recent decennial censuses as 
demonstrated by data supplied by the U.S. Census Bureau.
    Technical assistance and training. The provision of education, 
guidance, or instruction to one or more microentrepreneur(s) to prepare 
them for self-employment; to improve the state of their current 
microbusiness; to increase their capacity in a specific technical 
aspect of the subject business; and, to assist the microentrepreneur(s) 
in achieving a degree of business preparedness and/or functioning that 
will allow them to obtain, or have the ability to obtain, one or more 
microloans of $50,000 or less whether or not from program funds.
    Technical assistance grant. A grant whose funds are used to provide 
technical assistance and training, as defined in this section.
    (b) Abbreviations. The following abbreviations apply to the terms 
used in this subpart:

FTE--Full-time employee.
LLRF--Loan loss reserve fund.
MDO--Microenterprise development organization.
RMAP--Rural microentrepreneur assistance program.
RMRF--Rural microloan revolving fund.
TA--Technical assistance.


Sec.  4280.303  Exception authority.

    The Administrator may make limited exceptions to the requirements 
or provisions of this subpart. Such exceptions must be in the best 
financial interest of the Federal government, such as agreeing to the 
terms of a new repayment agreement to ensure repayment by a defaulted 
microlender. No exceptions may be made regarding applicant eligibility, 
project eligibility, or the rural area definition. In addition, 
exceptions may not be made:
    (a) To accept an applicant into the program that would not normally 
be accepted under the scoring system;
    (b) To fund an interested party that has not successfully competed 
for funding in accordance with the regulations.


Sec.  4280.304  Review or appeal rights and administrative concerns.

    (a) Review or appeal rights. An applicant MDO may seek a review of 
an Agency decision under this subpart from the appropriate Agency 
official that oversees the program in question, or appeal to the 
National Appeals Division in accordance with 7 CFR part 11.
    (b) Administrative concerns. If a microborrower has any questions 
or concerns regarding the administration of the program, including 
action of the microlender, contact: Business Programs, Specialty 
Programs Division, USDA, Rural Development, Rural Business--Cooperative 
Service, Room 6868, South Agriculture Building, Stop 3225, 1400 
Independence Avenue, SW., Washington, DC 20250-3225 or the USDA Rural 
Development State Office in the State in which the microborrower is 
located.


Sec.  4280.305  Nondiscrimination and compliance with other Federal 
laws.

    (a) Applicants must comply with other applicable Federal laws, 
including the Equal Employment Opportunities Act of 1972, the Americans 
with Disabilities Act, the Equal Credit Opportunity Act, the Civil 
Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, the 
Age Discrimination Act of 1975, and 7 CFR part 1901-E.
    (b) The U.S. Department of Agriculture (USDA) prohibits 
discrimination in all its programs and activities on the basis of race, 
color, national origin, age, disability, and where applicable, sex, 
marital status, familial status, parental status, religion, sexual 
orientation, genetic information, political beliefs, reprisal, or 
because all or part of an individual's income is derived from any 
public assistance program. (Not all prohibited bases apply to all 
programs.) Persons with disabilities who require alternative means for 
communication of program information (Braille, large print, audiotape, 
etc.) should contact USDA's TARGET Center at (202) 720-2600 (voice and 
TDD). Any applicant that believes it has been discriminated against as 
a result of applying for funds under this program should contact: USDA, 
Director, Office of Adjudication and Compliance, 1400 Independence 
Avenue, SW., Washington, DC 20250-9410, or call (800) 795-3272 (voice) 
or (202) 720-6382 (TDD) for information and instructions regarding the 
filing of a Civil Rights complaint. USDA is an equal opportunity 
provider, employer, and lender.
    (c) A pre-award compliance review will take place at the time of 
application

[[Page 51722]]

when the applicant completes Form RD 400-8, ``Compliance Review'' (or 
successor form). Post award compliance reviews will take place once 
every three years after the beginning of participation in the program 
and until such time as a microlender leaves the program.


Sec. Sec.  4280.306-4280.309  [Reserved]


Sec.  4280.310  Program requirements for MDOs.

    (a) Eligibility requirements for applicant MDOs. To be eligible for 
a direct loan or grant award under RMAP, an applicant must meet each of 
the criteria set forth in paragraphs (a)(1) through (8) of this 
section, as applicable.
    (1) Type of applicant. The applicant must meet the definition of an 
MDO under this program.
    (2) Citizenship. To be eligible to apply for status as an MDO, the 
applicant must be at least 51 percent controlled by persons who are 
either:
    (i) Citizens of the United States, the Republic of Palau, the 
Federated States of Micronesia, the Republic of the Marshall Islands, 
American Samoa, or the Commonwealth of Puerto Rico; or
    (ii) Legally admitted permanent residents residing in the U.S.
    (3) Legal authority and responsibility. The applicant must have the 
legal authority necessary to carry out the purpose of the award.
    (4) Direct loans. The applicant will be considered for a direct 
loan to capitalize a revolving loan fund if it submits an application 
that scores sufficiently to indicate that the applicant is 
appropriately qualified to perform under this program and will use 
program funding exclusively for making and administering a microloan 
revolving fund in one or more rural areas; and
    (i) Has demonstrated experience in the management of a revolving 
loan fund; or
    (ii) Certifies that it, or its employees, have received education 
and training from a qualified microenterprise development training 
entity to the extent that it has the capacity to manage such a 
revolving loan fund; or
    (iii) Is actively and successfully participating as an intermediary 
lender in good standing under the U.S. Small Business Administration 
(SBA) Microloan Program or other similar loan programs as determined by 
the Administrator.
    (5) Grants to support rural microenterprise development 
(enhancement grants). Any microlender participating in the program will 
be considered eligible to apply for an enhancement grant. Such grants 
must be used to improve the internal operations of the microlender so 
that they can improve their ability to deliver training, operational 
support, business planning, market development assistance, and other 
related services to rural microentrepreneurs. Other related services 
include improvement in the microlender's ability to make and service 
loans, arrive at sound lending decisions, improve operational 
efficiency, improve their marketing strategies so as to reach an 
increased number of potential microborrowers, enhance record keeping 
and data gathering, and penetrating new markets as they develop such as 
sustainable small farming, the greening of existing businesses, 
development of new green businesses, and other sectors yet to be 
developed. Any microlender that receives an enhancement grant to pursue 
an internal enhancement project must enter into an agreement with a 
trainer/service provider within 90 days of notification of the grant 
award. If the microlender does not enter into such agreement within 
these 90 days, the enhancement grant will be forfeited.
    (6) Grants to support microentrepreneurs (TA grants). The capacity 
of the applicant MDO to provide an integrated program of microlending 
and technical assistance will be evaluated during the scoring process. 
Therefore, an applicant MDO will be considered eligible to receive TA 
grant funding if it receives funding to provide microloans under this 
program, and agrees to use TA grant funding exclusively for providing 
technical assistance and training to eligible microentrepreneurs, with 
the exception that up to 10 percent of the grant funds may be used to 
cover administrative expenses, except as may be reduced as provided 
under Sec.  4280.312(a)(5). The following limitations will apply to TA 
grant funding:
    (i) Administrative expenses should be kept to a minimum. As such, 
the applicant MDO is required, in the application materials, to provide 
an administrative budget plan indicating the amount of funding it will 
need for administrative purposes.
    (ii) While operating the program, the selected microlender will be 
expected to adhere to the estimates it provides in the application. If 
for any reason, the microlender cannot meet the expectations of the 
application, it must contact the Agency in writing to request a budget 
adjustment.
    (iii) Budget adjustments will be considered and approved on a case 
by case basis.
    (7) Ineligible applicants. An applicant will be considered 
ineligible if it does not meet the definition of an MDO as provided in 
Sec.  4280.302; if it is debarred, suspended or otherwise excluded 
from, or ineligible for, participation in Federal assistance programs. 
The applicant will also be considered ineligible if it has an 
outstanding judgment against it, obtained by the United States in a 
Federal Court (other than U.S. Tax Court), is delinquent in meeting 
U.S. Internal Revenue Service (IRS) requirements, or cannot meet the 
requirements of paragraph (a)(6) of this section.
    (8) Delinquencies. No applicant will be eligible to receive a loan 
if it is delinquent on a Federal debt. (Note: See 31 U.S.C. 3720B, an 
applicant is still eligible for a grant if they are delinquent on a 
Federal debt; however, see 28 U.S.C. 3201, Federal judgment debtors 
(other than tax debts) are ineligible for Federal loans and grants).
    (b) Application eligibility. An application will be considered 
eligible for funding if it is submitted by an eligible MDO and will 
qualify for funding based on the results of review, scoring, and other 
procedures as indicated in this subpart, and will either:
    (1) Establish, or add capital to, an RMRF originally capitalized 
under this program; or
    (2) Establish or continue a training and TA program for rural 
microentrepreneurs as defined.
    (c) Business incubators. Because the purpose of a business 
incubator is to provide business-based technical assistance and an 
environment in which micro-level, very small, and small businesses may 
thrive, a microlender that owns and operates a small business 
incubator, as described, will be considered eligible to apply. In 
addition, a business incubator selected to participate as a microlender 
may use RMAP funding to lend to an eligible microenterprise tenant, 
without imposing a conflict of interest on itself.


Sec.  4280.311  Loan provisions for Agency loans to microlenders.

    (a) Purpose of the loan. Loans will be made to eligible and 
qualified microlenders to capitalize RMRFs. An RMRF will be an 
exclusive account, from which fixed interest rate microloans will be 
made to microentrepreneurs and microenterprises; into which payments 
from microborrowers and reimbursements from the LLRF will be deposited; 
and from which payments will be made by the microlender to the Agency. 
Interest earnings accrued by the RMRF will become part of the RMRF and 
may be used only for the purposes

[[Page 51723]]

stated above. However, with advance written approval by the Agency, the 
microlender may increase the funding in its LLRF